Comparison of Government Relationships in Australia and the USA - Case Study Example

Business Name: Course: Tutor: Date: Comparison of Government Relationships in Australia and USA Two primary institutions, identified as government and business, shape the contemporary society, of any country. Although many individuals know this, most of them including students become surprised after learning the various models of government- business relations existing throughout the contemporary world. The theoretical understanding of government-business relationship results from an ongoing development of various ideological and philosophical debates regarding the best way to organize society. This essay analyses the different paradigms adopted by countries through comparing the business government relationship in Australia and USA. It also discusses the extent, to which both countries adhere to communitarian or individualistic paradigms. The end of the cold war, between capitalism and communism, in the year 1989, resulted to an end in the economic competition based on the two ideologies, but gave rise to another form of competition between two forms of capitalists. George Lodge, a Harvard business school professor, in his work, “Perestroika for America: restructuring U.S. business-government relations for competitiveness in the world economy” (1990), provides a distinction between the two forms of capitalism (the American form and the European and Japanese variants of capitalism form). The American form of capitalism encourages the adoption of the free economy system, believed to be the best system for economy prosperity. The business-government relationship in USA, bases upon the individualistic form of capitalism. This ideological paradigm stresses on issues that include individual values, limited government intervention, entrepreneurship, profit maximization, mergers and open competition. Whereas the United States adopts the ideology of capitalism, Australia uses the mixed paradigm where the government is authoritative and prestigious, it sets community value or work ethic, and it touts team work, industry strategies, firm loyalty and creates a consensus (Avineri and Shalit, 1992). The relationship between business and government in Australia The Australian governments have traditionally aimed at achieving three major objectives of internal balance, external balance and economic growth within an economy. The three objectives aim at sustaining the national economic growth while maintaining low inflation as well as limiting foreign debts and liabilities. Australia is a prosperous economy with a higher GDP compared to nations such as Germany, the UK and France. Being a country that believes in the mixed market ideology, Australia believes in a free market that proves to be a remarkable engine of prosperity, which is an indispensable foundation of a liberal democracy. The key to such an approach in economics is the quest for balance between social good and free enterprise, market and government, as well as the economic freedom and society’s broader needs (Gregory, 1988, p. 134). Although there is an existence of a free market, there is a high level of intervention by the government to the economy. The government believes that, through maximum intervention, market failure would be corrected; there would be income and wealth distribution equitability as well as improved performance of the economy. In Australia, all heavy and basic industries, as well as strategic sectors of the economy, are controlled by the government. For instance, there are many major owned enterprises in banking, communication, and in the transport industry. The government controls such industries as a mechanism for ensuring scarce resources become equitably distributed among the population. Unlike in a free economy where aggressive competition is encouraged, Australia encourages favorable competition by allowing the government to carry out economic activities that are also undertaken the private sector. This ensures that the two sectors exist side by side and function in a properly coordinated manner. As such, the government controls the competition between businesses in the economy by implementing competition policies that act against anti- competitive behaviors by firms within markets. For example, the Australian government regulates price fixing cartels and ensures that monopoly enterprises do not exploit their monopoly power and damage the welfare of the consumers. Additionally, government regulation is used to introduce new competition in the market. Through market liberalization strategies such as breaking up the existing monopoly powers of certain industries, businesses are allowed to engage in new competitive markets. Kriesler (1999) explains through his work, The Australian economy, that the introduction of new market competition facilitates stable and favorable environments for business survival and prosperity. In a mixed economy, the government usually intervenes in price mechanism as a way of changing the allocation of resources so as to achieve improved economic and social welfare. In Australia, this is not a new thing. The government through the parliament passes laws that regulate price controls in most of the main utilities such as gas, telecommunications, and electricity. Although free market economists criticize such scale of regulations in the economy arguing that it creates unnecessary cost burdens to businesses, the government usually focuses on the social welfare of the country rather than the individual welfare of businesses (Avineri and Shalit, 1992). Since the Australian government is authoritative and prestigious, it controls, regulates and plans the economy of the country. Through planning the economy, the government obtains dictatorship power since it controls and regulates the production and distribution of resources in the country. With this economy type, the government ensures the provision of stability and advancement in the economic growth by allocating resources to the innovative enterprises. In Australia, with regard to the economy, the government makes all decisions despite the existence of private markets. Businesses and corporations make decisions on their operations based on how and what the government stipulate about production and distribution of resources (Gregory, 1988). The relationship between business and government in United States The United States has the largest, most diverse and most technologically advanced economy in the world. Although it only accounts for 4% of the world’s population, its GDP is 26% of the total economic world output. The economy of this nation is a free-market, private enterprise with limited government intervention in areas such as transportation, retirement and healthcare. The government enables individuals to engage in economic activities with a great degree of economic freedom. During the 19th century, philosophers such as Mill spread the idea of market oriented economy and influenced the passage of several factory acts. The market oriented economy allows the privatization of businesses with minimum government intervention (Lodge, 1990). For instance, the United States government plays a small role in the planning and monitoring of its economy. Supporters of this ideology believe that limited state control leads to successful economies. For example, during the economic crisis in 1988, the US experienced high inflation together with reduced consumer spending but this condition changed after the then president, Ronald Reagan, reduced government involvement in economic activities. One characteristic of a capitalist economy is that it is not planned, regulated or controlled by the government. In this system, the price mechanism, which operates automatically without control and direction from the central authorities, guides economic decisions and activities. The United States government does not centrally fix prices of goods and services unless they are necessity products. Through the price mechanism system, natural laws of supply and demand fix the prices of goods and services. The system tends to be more beneficial to businesses and consumers as it determines or signals the level of product production and consumptions. In other words, it enables efficient allocation of resources by businesses as they produce the right amount of products that would be consumed. The most important feature of a capitalistic economy according to Gacs (1999, p. 58) is competition. The American government provides business environments that allow aggressive competition between businesses by implementing the antitrust laws. The federal trade commission’s bureau of competition facilitates the right of consumers by protecting and promoting free and vigorous competition. The advocators of aggressive competition among sellers in a free and open market argue that the benefits derived from the competition include lower prices, increased innovation, and consumer protection from anticompetitive business practices and mergers as well as high quality products. As stated earlier, the United States operates its economic system through the principles of individualistic capitalism. Karl Marx described a capitalist economy as a system in which a small group of people control large amounts of capital and make the most important economic decisions. In United States, the government allows private individuals to own and manage factors of productions. Through the development of factor markets, businesses can trade in all the four factors of production. Although there are no limitations as to, which country should own the factors of production, the government has set rules and regulations regarding monopolistic ownership and control of factors of product (Loevinger, 1949). Businesses operating in capitalist system usually have the motive of profit maximization. In America, businesses operate with the main aim of profit making. The government provides favorable working conditions and environment for businesses through support programs. The office of commercial and business affairs plays a key role in coordinating trade and investment matters by supporting U.S firms doing businesses overseas. Its mission is to ensure that the private business sector is fully integrated into the U.S economic and foreign policy, and engages the government’s resources to promote and assist U.S businesses oversee. By coordinating with State Department advocacy on American businesses behalf, the CBA provides assistance in issues that include market opening, intellectual property protecting, leveling the playing field and resolving trade and investment disputes. Domestically, the U.S government, chiefly supports the small and medium sized businesses through programs such as The United States Commercial Service. Such programs aim at helping businesses find qualified international partners as well as representing their business interests both locally and internationally. In addition, the U.S government provides subsidies for private businesses in all industries, individualized advocacy and counseling, training programs and equitable allocation of resources that enable business achieve their main goal of operation which includes maximizing their profits. Through maximizing profits, businesses can be able to expand their operations and activities, and as a result, the economy of a country would grow and be prosperous (Loevinger, 1949). Comparing the government-business relations of Australian and United States Based on the economic systems adopted by the two countries it is evident that both countries adopt different ideologies regarding government-business relations. The differences identified include: 1. Australia adopts a planned economic system whereas the United States adopts a market oriented economic system. 2. Australia believes in a mixed economy with maximum government intervention while the United States believes in a free economy system with minimum government intervention. 3. Businesses in Australia engage in favorable competition provided by the government whereas businesses in America engage in aggressive competition due to minimum government regulations 4. Businesses in Australia operate under a heavily regulated economic environment while businesses in United States operate under a relatively minimum regulated economic environment by the government. 5. The Australian government controls and owns most of the factors of production the country while the United States allows individuals to own and control factors of production under the government regulations. 6. In Australia, the government controls the prices of most goods and services in the economy through pricing policies whereas in the United States, the government allows automatic pricing mechanism to take effect in controlling the prices of goods and services. Conclusion By engaging in a mixed economy system that focuses on maximum government intervention, the Australian government-business relationship adherers more towards a communitarian paradigm compared to the individualist paradigm. On the other, United States adheres towards the individualist paradigm by adopting a free economic system with limited government intervention. Judging from a country’s economic performance, evidence reveals that individualistic paradigm for government-business relationship is more beneficial and productive than the communitarian paradigm. References Avineri, S., & Shalit, A. (1992). Communitarianism and individualism. Oxford, England: Oxford University Press. Gacs, J. (1999). The mixed blessing of financial inflows: transition countries in comparative perspective. Cheltenham, UK: Edward Elgar. Gregory, R. G. (1988). Recovery from the depression: Australia and the world economy in the 1930s. Cambridge: Cambridge University Press. Kriesler, P. (1999). The Australian economy (3rd Ed.). St Leonards, N.S.W.: Allen & Unwin. Lodge, G. C. (1990). Perestroika for America: restructuring U.S. business-government relations for competitiveness in the world economy. Boston, Mass.: Harvard Business School Press. Loevinger, L. (1949). The law of free enterprise: how to recognize and maintain the American economic system. New York: Funk & Wagnalls Co., in association with Modern Industry Magazine. Read More